In anticipation of COP16, the UN Convention on Biological Diversity taking place in October 2024, we recently gathered key market participants in Washington, DC, to discuss challenges and best practices for addressing, measuring, integrating, and reporting on nature. Approximately 20 stakeholders, including some of the world’s largest multilateral development banks, commercial banks, nongovernmental organizations and standard setters joined our roundtable discussion to share their insights.

Recent developments for nature

Over the past year, at events ranging from Climate Week NYC to COP28 to Davos, addressing nature loss has become front and center on the world stage. Biodiversity and nature’s ecosystem services sustain our society and economy, and nature loss is increasingly being recognized as a business risk. An April 2023 analysis by PwC found that more than half of global GDP, equivalent to $58 trillion, is moderately or highly dependent on nature. S&P Global Sustainable 1 data shows that 85% of the world’s largest companies have a significant dependency on nature across their direct operations. 

Countries and companies alike are beginning to take direct action to reverse nature loss and preserve ecosystem services. The 2022 UN Biodiversity Conference (COP15) adopted the Kunming-Montreal Global Biodiversity Framework, setting 23 targets for 2030 and four goals for 2050. Countries are now developing National Biodiversity Strategies and Action Plans (NBSAPs). Meanwhile, many companies are  starting to conduct nature-related scenario analysis and set nature-related targets and commitments. They are increasingly disclosing on elements of their nature-related strategy, adhering to mandatory or voluntary reporting frameworks such as the EU’s Corporate Sustainability Reporting Directive, the standards published by the International Sustainability Standards Board (ISSB) and the Taskforce on Nature-related Financial Disclosures (TNFD), to name a few.

What did we learn at the roundtable?

During our conversation, one thing was clear: Nature and biodiversity may be a newer topic for some in the business community, but it is now one that participants felt they must respond to with urgency.  They found value in having a forum to learn from one another and share best practices on measuring, integrating and reporting on nature. Here are four key takeaways:

1. Nature is already part of the ISSB standards

We learned that the IFRS S1 and S2 standards developed by the ISSB implicitly capture nature. We were reminded that these two standards set out a framework for disclosure wherever there is material information  on a sustainability-related risk or opportunity, and in some cases that would entail nature. As we have previously written, climate and nature are intertwined and must be addressed together. Significant change is needed by 2030 and 2050 to meet the goals of the Paris Agreement on climate change and the Global Biodiversity Framework. The loss of nature presents a risk to business, and some solutions can both help increase resilience to climate change and strengthen nature.

Going further, the ISSB issued a public consultation on its future prioritiesto seek feedback on potential research projects, including whether to prioritize a project on biodiversity, ecosystems and ecosystem services. After reviewing responses, the ISSB launched a research project to determine the need for a new global standard focused on nature.

Overall, the reporting landscape is evolving rapidly, with nature-focused frameworks advancing faster than predecessors like the Task Force on Climate-related Financial Disclosures. Major progress has been made in a short time, such as the establishment of the TNFD and the Network for Greening the Financial System’s technical document on nature-related scenarios. There is fragmentation within the reporting landscape, whether reporting on sustainability, climate or nature. 

Organizations like the ISSB aim to reduce fragmentation and create a global baseline for reporting. It is currently working on tackling interoperability among existing frameworks. On nature and biodiversity, we heard the desire for greater clarity on key definitions, such as species abundance and financial materiality.

2. Shifting the focus from nature risks to nature-positive investment potential

The conversation about climate differs from that of nature. While investors see clear opportunities in climate change mitigation — for example, investing in renewable energy sources that can replace carbon-intensive fossil fuels — the discussion on nature has predominantly focused on measuring risk.

Market participants suggested a shift in approach to nature: Rather than leading with risk identification, there should be a greater emphasis on opportunities, such as defining the acceptable use of proceeds for nature investments. 

By leading with opportunities, participants felt the market may adopt nature initiatives more quickly. For example, nature is a small, but growing part of the $1 trillion sustainable bond market. 

3. Challenges facing multilateral development and commercial banks

There is growing interest in nature-focused initiatives at multilateral development banks and at commercial banks. However, both face challenges in meeting this demand. 

For multilateral development banks, a primary obstacle is mobilizing private sector investment. This involves developing scalable and repeatable investment instruments. They also face a low volume of nature-related projects in the pipeline, coupled with ongoing incentives that continue to subsidize harmful activities, such as agricultural subsidies that incentivize practices that can result in ecosystem degradation. 

On the other hand, commercial banks acknowledge a gap between client inquiries — from sovereigns and corporates who wish to finance nature — and their capacity to implement. They struggle with defining and tracking key performance indicators for nature-related financial instruments or receiving support from investors. 

4. Market dynamics and opportunities in nature financing 

The roundtable discussion highlighted the efforts to integrate nature and biodiversity considerations into financial analysis and strategies. Damage to nature and ecosystems is still largely an economic externality, or a cost not priced into markets, which means nature is not taken into account in most financial calculations. However, innovative sustainable investing products like debt-for-nature swaps are emerging. 

Latin America, home to six of the most biodiverse countries, has already issued numerous nature-related green bonds. The region is a leader in green, social, sustainable, and sustainability-linked bonds, with an expected issuance of $45 to $55 billion in 2024.

Innovative instruments are also gaining traction. For instance, Uruguay issued a $1.5 billion sovereign sustainability-linked bond in 2022, featuring key performance indicators on forest preservation. Additionally, Ecuador completed the largest debt-for-nature swap in 2023, dedicating millions of dollars to conserve the Galapagos Islands.

Conclusion

The roundtable discussion underscored an increasing interest in building the business world’s capacity to fund nature, the necessity of linking nature to other sustainability disciplines and a shift toward leveraging nature-related opportunities to address environmental challenges effectively. 

As we look ahead to COP16 in Cali, Colombia, we encourage more platforms where market participants can discuss both the challenges and opportunities related to nature. With COP16 aiming to propel the Global Biodiversity Framework into action, it is crucial for stakeholders to convene and share best practices.